STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

April 6, 2004 Agenda ID #3424

Adjudicatory

TO: PARTIES OF RECORD IN INVESTIGATION 02-05-001
AND APPLICATION 01-12-013

This is the draft decision of Administrative Law Judge (ALJ) McKenzie. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. The Commission may act then, or it may postpone action until later.

When the Commission acts on the draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Parties to the proceeding may file comments on the draft decision as provided in Article 19 of the Commission's Rules of Practice and Procedure (Rules). These rules are accessible on the Commission's Website at http://www.cpuc.ca.gov. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the Assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

ANG:hkr

Attachment

ALJ/MCK/hkr DRAFT Agenda ID #3424

Adjudicatory

Decision DRAFT DECISION OF ALJ McKENZIE (Mailed 4/6/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Investigation into NOS COMMUNICATIONS, INC. (U-5251-C), dba International Plus, 011 Communications, Internet Business Association (INETBA), I-Vantage Network Solutions; AFFINITY NETWORK, INC. (U-5229-C), dba QuantumLink Communications and HorizonOne Communications; and the corporate officers of NOS and ANI, to determine whether they have violated the laws, rules, and regulations governing the manner in which California subscribers are solicited, switched from one presubscribed carrier to another, and billed for telephone services.

Investigation 02-05-001 (Filed May 2, 2002)

In the Matter of the Application of Blue Ridge Telecom Systems, LLC for a Certificate of Public Convenience and Necessity to Provide Facilities-Based and Resold Local Exchange Services Within California.

Application 01-12-013 (Filed December 10, 2001)

FINAL OPINION APPROVING SETTLEMENT AGREEMENT

TABLE OF CONTENTS

Title Page

FINAL OPINION APPROVING SETTLEMENT AGREEMENT 22

Summary 22

Procedural Background 33

Terms of the Proposed Settlement 1010

Discussion 1818

Comments on Draft Decision 2424

Assignment of Proceeding 2424

Findings of Fact 2525

Conclusions of Law 2525

FINAL ORDER 2727

ATTACHMENT A ALL PARTIES' SETTLEMENT AGREEMENT

FINAL OPINION APPROVING SETTLEMENT AGREEMENT

Summary

In this decision, we approve with modifications a settlement agreement entered into between the Commission's Consumer Protection and Safety Division (CPSD) and certain of the respondents in this proceeding. The settlement agreement was filed on December 9, 2003, and is appended hereto as Attachment A.

Under the settlement agreement, the respondents will make payments to the Commission over a 24-month period totaling $2,950,000. Of this sum, $2,900,000 will be deposited into the State's General Fund, and $50,000 will be set aside for customer restitution. Each of about 1400 customers will receive a restitution payment of $25, and $7,825 of the $50,000 will be used to compensate the settlement claims administrator, Rosenthal & Company LLC (Rosenthal), that CPSD and the respondents have agreed will handle the actual notification of customers and payment of restitution.

The settlement agreement also requires that for a two-year period after approval of the settlement, respondents will abide by the "Call Unit Marketing and Sales Compliance Program" that is an integral part of the settlement and consent decree that respondents entered into with the Federal Communications Commission (FCC) in December 2002.¹

Finally, CPSD has agreed to withdraw its protest of Application (A.) 01-12-013, in which Blue Ridge Telecom Systems, LLC (Blue Ridge)-a company controlled by the same individuals who control respondents NOS Communications, Inc. (NOS) and Affinity Network, Inc. (ANI)-seeks a certificate of public convenience and necessity (CPCN) to operate as a facilities-based reseller of local exchange services in California. CPSD has agreed to withdraw its protest of A.01-12-013 within 30 days after issuance of a Commission decision approving the settlement agreement, so that Blue Ridge's application can be "resolve[d] . . . as an unopposed application."

Applying the standards of Rule 51.1(e) of our Rules of Practice and Procedure (Rules), we find that with certain modifications, the settlement agreement is reasonable in light of the whole record, consistent with law, and in the public interest. We will therefore approve it, as modified.